In 2021, China continued to premise the trade policy on trade liberalization and support for the multilateral trade system. In the past several years, China prioritized free trade agreement negotiations and the construction of in-state free trade zones as the key step to facilitate trade and investment home and abroad.

China was the first among the 15 consignees to officially ratify the Regional Comprehensive Economic Partnership (RCEP). It is by far one of the most significant moves of China in implementing the dual circulation economy strategy.  China’s trade with members of RCEP accounts for approximately one-third of its annual trade. The more integrated market among the members as the result of the Agreement will be conducive to the promotion of trade and investment in this region. As to the trade and investment rules in the region, the RCEP Agreement sets an example for future and further similar FTA negotiations and solved the spaghetti bowl issues by providing more favourable treatment to enterprises from the member states. With the aid of the cumulative rules of origin, the supply chain may become more sophisticated and stable among members; with new schedules, SPS, TPT as well as the relevant assessment rules, tariff and non-tariff trade barriers will be removed to boost trade in larger volumes; and with the benefit of new technologies applied in the rules of customs trade facilitation, cross border logistics may become more fluent and efficient. And the wide introduction of negative list management in the service trade and foreign investment provides safeguards for the protection of foreign investment and consequently encourages more cross border investment and service trade in this region.

Besides, China also applied for access to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA) , which exhibits the great ambition to promote the liberation of trade in a larger geometric region and digital world.

On the other hand, China aims to widen the open-up policy by way of building in-state pilot free trade zones. By far, there have been 21 pilot free trade zones in China, among which Hainan Pilot Free Trade Port is in the leading position. In June 2021, the Hainan Free Trade Port Law came into force which provides legal authority and autonomy to the government to further liberate and facilitate trade and investment on the island. Particularly, trade of most goods could enter the market on the island freely at zero tariff rate, trade of service will be accorded national treatment and managed under the frame of the negative list which is a breakthrough in China’s management of trade of service nationwide. For cross border investment, the local government will employ a simplified procedure to assess potential foreign investment with a reduced negative list of the entrance so to accord more facilitations to qualified foreign investment.

Trade remedy is one of the most important areas in China’s enforcement of trade law. Notably, 2021 is the first year that China did not initiate any trade remedy investigations since its accession to the WTO  20 years ago. The latest similar scenario occurred in 2008 when the financial crisis swept the global market and China refrained from employing trade restriction measures such as trade remedy measures. Maybe this time the worldwide market downturn amid the pandemic may explain the reason why China did not resort to importing restriction policy tools and not launch any trade remedy investigations.

Another notable policy change is that China’s investigating authority seems to stop applying the non-market-oriented industry practice in investigations against imports from the US. On 6 Sep 2021, the Ministry of Commerce released the preliminary decision in an anti-dumping case against US Polyphenylene ether, exported by SABIC America. Without a ruling on the non-market allegation in the US market, the Ministry rendered a dumping margin of 18% to the US producer. On 10 Sep, the preliminary decision against US-produced Certain glycol ethers designated a 57.4% dumping margin to a US exporter. (The relatively high margin seems partly due to the exporter’s failure to provide cost-related information so that the facts available rule kicks in here.) Later in the final determinations, the authority confirmed the decisions not to invoke the non-market methodology in these two cases. Further, in the AD investigation on US PVCs, the procedure was terminated due to a finding of no injury, leaving the non-market-oriented industry issue untouched. These practices may signal a policy U-turn by Chinese authority in the handlings of anti-dumping investigations which regarded some American industries as non-market-oriented industry[2] appeared two years ago. Similarly, in the anti-dumping investigation on wines from Australia, the authority did not rule on the allegation of the particular market situation that existed in the Australian market either. To some extent, the practice to investigate market structure or characteristics related issues seems to pause without new petitions on such issues in the coming years.

Even without new petitions and investigations, China’s authority has processed six sunset reviews in the past twelve months. One particularly interesting case is the review on the anti-dumping measure imposed on the imported optical fibre from Korea and Japan which was first introduced in 2003. The review is still in process and the decision is expected by the end of 2022. The anti-dumping measure will be the second oldest measure in Chinese practice should the result of the ongoing review render an affirmative decision. We could reasonably assume another stance change concerning the time limit of a trade remedy measure which China advocated not to be extended longer than 10 years in the past. On the other hand, two of eight measures that are expected to lapse in 2021 did expire with lives of less than 10 years.

In the past several years, issues of export control and economic sanctions attracted the attention of Chinese enterprises and the public. Several important laws and regulations have been enacted which may bring forth a profound impact on the business and management of Chinese enterprises.

To counteract the exterritoriality of foreign sanctions, China promulgated the Counter Sanction Law in June 2021 and authorized the government to take actions to deter and counteract the impact of unfair and discriminatory foreign sanctions, private individuals and companies to sue for loss incurred due to such foreign sanctions. As of the date of release of this review, several foreign individuals and entities have been sanctioned by the Chinese government in accordance with the Counter Sanction Law. In general, this new Law serves as a defensive tool in reaction to sanctions and other equivalent measures taken by other governments. In early 2021, the Ministry of Commerce also released a ‘blocking statute’ to shield citizens and companies from being impacted by the exterritoriality of some economic sanctions adopted by foreign governments that unreasonably restrict Chinese entities from engaging in business and commercial activities. Particularly, the blocking statute empowers the people’s court to adjudicate on sanction related lawsuits and grant compensations if so determined. As of the date of the review, there have been no lawsuits or administrative procedures initiated under the framework of the blocking statute.

On the positive side, 2021 is the first year of China’s implementation of the Export Control Law and the new administrative system and law enforcement procedure are introduced before the public. Besides, the Ministry of Commerce also renewed its guidelines to encourage and direct domestic entities to design their export compliance programs. Another prominent move by China’s export control authority is the release of the Whitepaper on Export Control for the first time in history. In the report, China explains the official stance on export control related policy issues, including the policy objectives, the administrative mechanism, the legal system, the development and evolvement of Chinese export control policy and international communications and cooperation with trade partners. In general, the first year of the implementation of the Export Control Law witnessed efforts by the Chinese government to streamline the management mechanism and to integrate the administrative resources.

In 2021, China was involved in five disputes with other WTO members, three of which were between China and Australia. Australian government requested the dispute settlement procedure in several trade remedy measures taken by China on Australian exports, including barley and wines. After consultations, a panel for the China — Anti-dumping and countervailing duty measures on barley from Australia (DS 598) was established, and another panel for the China — Anti-Dumping and Countervailing Duty Measures on Wine from Australia (DS 602) is to be composed soon. The key issues raised by the complaint side in the two disputes are similar: whether the domestic industries were defined properly for the alleged deficiencies of either the standing of a commerce chamber or lack of transparency in calculating the overall domestic output, whether it is proper in the two disputes by the investigating authority to employ the facts available rule in the calculation of dumping margins, and whether the injury findings were appropriate and whether non-attributing factors were properly considered by the authority. Interestingly, the two members agreed in the two disputes to resort to Multi-Party Interim Appeal Arbitration Arrangement Pursuant To Article 25 Of The DSU (MPIA) and to set a framework for arbitrators to decide on any appeal of any final panel report issued in the disputes, if the Appellate Body was unable to hear appeals of such panel reports. It is reasonable to assume the two members may agree to a similar arrangement in another dispute, Australia — Anti-Dumping and Countervailing Duty Measures on Certain Products from China (DS 603).

On the rule negotiation front, China played an active role in the negotiation on services domestic regulation in WTO. The new rule is the first in trade of service in 24 years and put a piece of the puzzle to complete the trade of service rules of WTO. Under the new rule, China committed to improving the business climate, lowering trade costs and cutting red tape to transform the management of trade of service to become clearer, more predictable and more transparent.

The General Administration of Customs continued to make efforts to facilitate trade, import and export. In 2021, two legislative moves attract the trade professionals’ attention. The first is the modification of the Customs Law, among which the removal of requirements of custom brokers will provide exporters and importers more options to deal with their customs issues and lower the related expenses in customs declaration and clearance.

Another notable achievement is China’s signings of AEO (authorized economic operator) mutual recognition agreements with trade partners. As of the end of 2021, China has entered 47 such agreements, which is the highest worldwide, to render preferential clearance treatments to AEOs designed by other countries and guarantee Chinese exports to receive equivalent treatments when declaring before foreign customs. Such arrangements may significantly shorten the time needed for customs clearance and facilitate both import and export of highly credited companies.